State officials are working to redevelop Honolulu Harbor

State officials are trying to lure a museum back to Honolulu Harbor where a waterfront attraction once described as world-class closed 14 years ago.

The state Department of Transportation is seeking bids from private developers to lease the former home of the Hawaii Maritime Center, which Bishop Museum closed in 2009 after chronic financial stress.

A 65-year land lease is being offered for the Pier 7 site occupied by the deteriorated former museum building next to a wharf where the decaying iron hull of the 19th-century sailing ship Falls of Clyde remains moored despite years of failed efforts by DOT to remove the historic vessel, which was once part of the Maritime Center museum.

At least one entity, a company affiliated with the operator of the Space Needle in Seattle, is interested but declined to share details of its plan because bidding is competitive.

DOT’s offer, published earlier this month, is part of an enduring ambition by state officials to have private developers create public attractions that revitalize state land along part of the harbor’s mauka edge — an area including Pier 7 and several neighboring piers near Aloha Tower and generally referred to as the Aloha Tower complex.

“By creating a vibrant ‘local’ destination with a variety of uses, interests and enterprises, the Aloha Tower complex will in turn become an attraction for visitors who will further contribute to its economic vitality,” declares a DOT 2050 Honolulu Harbor master plan published in November. “The (plan) envisions a re-energized Aloha Tower complex and the return of the community to the waterfront.”

In addition to a museum, other additions envisioned for the area under the master plan include a boutique hotel, retail, a science center, a special-event space, a hula mound, a pedestrian promenade and parking.

State officials, however, have struggled for decades to produce a critical mass of public attractions with private partners in this underutilized part of the harbor stretching from Piers 5 to 14.

Faded excitement

An initial effort took root in 1981 when the Legislature created the Aloha Tower Development Corp., a semi-­autonomous agency, to pursue private development of 17 acres around the iconic clock tower and lighthouse that was once the tallest building in Honolulu when tourists to Hawaii arrived via passenger ship.

After years of work that led to consideration of competing developer plans, ATDC’s board in 1989 picked Aloha Tower Associates, a partnership between local developers and a Baltimore firm, to produce a retail complex, two condominium towers, an office tower, a business hotel, a cruise terminal, 2,000 underground parking stalls and a pedestrian bridge over Nimitz Highway.

When completed, the project was supposed to generate $4 billion in ground lease rent for the state over 65 years.

“This will be one of the most exciting places in Honolulu in the future,” then-Gov. John Waihee said during a ceremony aboard the Falls of Clyde in 1990 announcing a signed development agreement.

A $95 million retail center, Aloha Tower Marketplace, opened in 1994. But a weakening economy and pullback from lenders financing the bigger project derailed subsequent phases that would have helped support shops and restaurants.

As a result, the marketplace suffered and led the original developer and one subsequent owner into bankruptcy.

ATDC continued exploring redevelopment, and in 2006 picked a plan by Texas developer Ken Hughes that included a 300-unit residential, hotel and timeshare complex plus retail and restaurant space and a pedestrian promenade around the water’s edge of Piers 5 and 6.

But the agency and Hughes couldn’t agree on lease rent or a solution to inadequate marketplace parking, which led Hughes to seek damages. An arbitrator in 2009 awarded the developer $1.6 million, which the state unsuccessfully challenged in federal court.

Then in 2012, Hawaii Pacific University acquired the marketplace and converted it largely for its own use, though some commercial tenants remain.

The private university also intended to lease Pier 7 and convert the site into a faculty club and alumni center, but that never came to fruition.

New interests

After ATDC’s debacle with Hughes, the agency was reconstituted under more direction of DOT but went dormant without holding a board meeting for nearly four years until May 2021.

According to the agency’s 2021 annual report, meetings resumed to consider unsolicited development proposals for the Aloha Tower complex.

Derek Chow, ATDC chair and DOT’s Harbors Division deputy director at the time, said in the report that entities had expressed interest in development at Piers 5/6 and 10/11.

HPU, Harbors 808 LLC and a firm affiliated with the Space Needle and the adjacent Chihuly Garden and Glass attraction in Seattle expressed interest.

“As 2021 comes to a close, we at the ATDC like the rest of the state are optimistic that economic stability will return in 2022 and that developers will be successful in once again creating a community gathering place at the Aloha Tower complex,” Chow said in the report.

It’s unclear what happened to much of that interest. According to a state list of agency board meetings, ATDC hasn’t held a meeting since November. The agency also hasn’t met a statutory requirement for filing a 2022 annual report.

A DOT representative said ATDC files could not easily be found last week and that DOT staffers who managed ATDC work are no longer with DOT.

Lori Lum, a local representative of the interested Seattle company, Center Art LLC, said the company withdrew its interest to develop a project similar to Chihuly Garden and Glass at Piers 10 and 11. However, Center Art, a subsidiary of Space Needle LLC, intends to submit a proposal to lease Pier 7, which is governed by DOT and not ATDC.

“They do intend to submit a proposal,” Lum said.

Chihuly Garden and Glass opened in 2012 next to the Space Needle and features indoor and outdoor galleries featuring the work of renowned Washington glass artist Dale Chihuly. The museum, where general admission is $30 or $35 depending on the time of day, also includes a bar and a bookstore.

Failed auctions

The current effort to lease Pier 7 via auction is not DOT’s first attempt.

In October the agency solicited bids to lease the site with an initial upset annual rent of $628,300 and a required $8 million to $12 million investment, but no qualifying bids resulted.

DOT’s new offer has a $300,000 annual rent minimum for the first 10 years and a requirement to invest at least $15 million in the property.

According to the harbor master plan, the former Maritime Center building has extensive termite damage and could be deemed unsalvageable.

Local ocean cargo transportation firm Matson Inc. acquired the lease for Pier 7 from Bishop Museum in 2018 with intent to use the property as its headquarters, but that plan fell through. The company continues to pay DOT lease rent.

Meanwhile, the Falls of Clyde has been stubbornly moored on one side of Pier 7 after separate failed DOT auction efforts that followed attempts by others to restore or scuttle the ship.

The 266-foot ship, built in 1848 in Scotland, has a storied history of various uses including delivery of sugar to the mainland by Matson. In 1968, Bishop Museum acquired the vessel and later opened it to public tours at Honolulu Harbor after a restoration.

Citing financial losses, Bishop Museum ceased tours in 2007, stripped down the ship and prepared plans to scuttle the state and national historic landmark off Waianae to create a diving attraction in shallow water or in deeper water as an artificial reef.

A local nonprofit, Friends of Falls of Clyde Inc., in 2008 stepped in and took ownership of what had long been the only remaining four-masted full-rigged ship in the world. Yet the organization’s plans to raise money to restore the ship faltered as DOT pushed for safety improvements or removal.

In 2016, DOT impounded the Falls of Clyde, and three years later held an auction to find someone to acquire and remove the vessel. The 2019 auction received just one bid, and it was a prank offer for 25 cents purportedly from Russian President Vladimir Putin.

DOT tried again in 2021, and conditionally agreed to one real proposal by a Scottish-based entity aiming to return the Falls of Clyde to its birthplace. However, DOT canceled the award in 2022 after the bidder, Save Falls of Clyde International, failed to satisfy conditions for removal that included securing a performance bond.

Dre Kalili, DOT Harbors Division deputy director, said a new request for removal proposals is in the works and includes delisting the ship from the state and national registries of historic landmarks.

A timetable for potential removal was not available.

“We’re not prepared to comment further on this at the moment,” Kalili said in an email.

Bids for the Pier 7 lease are due Aug. 8, and prospective bidders also must submit information required to qualify by June 21.